MULTIPACK SYSTEMS P.LTD, MUMBAI V. ADDL CIT RG 2(2), MUMBAI

ITA 116/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3957 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 05-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Section: 142(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE S/SHRI B.R.MITTAL,(JM) AND SANJAY ARORA (AM) . . , , & ./I.T.A. NO.116/MUM/2012 ( / ASSESSMENT YEAR:2008-09) M/S MULTIPACK SYSTEMS PVT.LTD, ROHIT CHAMBERS JANMABHOMI MARG, FORT, MUMBAI-400001 / VS. ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE 2(2), ROOM NO.548,5 TH FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI-400020 ./ ./PAN/GIR NO. : AAACM3013E ( / APPELLANT) .. ( / RESPONDENT) / APPELLANT BY : KINJAL BHUTA /RESPONDENT BY : SHRI O.P.SINGH ' / DATE OF HEARING : 25.7.2013 ' /DATE OF PRONOUNCEMENT : 25.07.2013 / O R D E R PER B.R.MITTAL, JM: THE ASSESSEE HAS FILED THIS APPEAL FOR ASSESSMENT YEAR 2008-9 AGAINST ORDER DATED 18.10.2011 OF LD CIT(A)-5, MUMBAI ON THE FOL LOWING GROUNDS: 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDI TION MADE BY THE AO OF RS.62,02,392/- ON ACCOUNT OF UNUTILIZED CENVAT CRED IT AND RS. 10,33,898/- ON ACCOUNT OF UNUTILIZED CENVAT CREDIT ON SERVICE TAX AND DIRECTING THE AO TO RECOMPUTE THE PROFIT AFTER MAKING ADJUSTMENTS WITH REFERENCE TO OPENING STOCK, CLOSING STOCK, PURCHASES AND SALES. YOUR APPELLANTS SUBMIT THAT THE SAID AMOUNTS ARE NOT THE INCOME OF YOUR APPELLANTS AND THEREFORE THE SAME OUGHT NOT TO BE ADDED TO YOUR APPELLANTS INCOME, AND THAT THE COMP UTATION OF PROFIT IS ALSO NOT REQUIRED TO BE DONE. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT YOUR A PPELLANT, FOR THE PURPOSE OF VALUATION OF INVENTORIES, HAVE ADOPTED THE INCLUSIV E METHOD OF VALUATION OF INVENTORIES, HAVE ADOPTED THE INCLUSIVE METHOD OF V ALUATION PRESCRIBED U/S 145A I.T.A. NO.116/MUM/2012 2 OF THE INCOME TAX ACT, 1961 AND NO SUCH ADJUSTMENTS WITH REFERENCE TO OPENING STOCK, CLOSING PURCHASES AND SALES ARE REQUIRED 2. ASSESSEE IS A COMPANY FILED ITS E-RETURN OF INCO ME ON 27.9.2008 DECLARING TOTAL INCOME OF RS.12,99,97,326/-. ASSESSEE IS ENGAGED IN THE MANUFACTURING PACKING MACHINERY. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICES UNDER SECTIONS 143(2) AND 142(1) DATED 6.8.2009 AND 4.2.2010. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTICED THAT THE ASSESSEE HAD UNUTILIZED CENVAT CREDIT OF RS. 88,56,735/- ON ACCO UNT OF RAW MATERIAL AND RS. 58,22,062/- ON ACCOUNT OF SERVICE TAX, WHICH HAS NO T BEEN OFFERED FOR TAXATION. AO ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE UNUTILI ZED CENVET CREDIT HAVE NOT BEEN ADDED TO THE CLOSING STOCK ON THE COMPUTATION OF IN COME. BEFORE THE AO THE ASSESSEE EXPLAINED THAT IT WAS FOLLOWING INCLUSIVE METHOD OF VALUATION OF STOCK AND HAD VALUED THE STOCK INCLUSIVE OF EXCISE DUTY AND SALES TAX AND, T HEREFORE, THERE WAS NO NEED TO INCLUDE MODVAT, EXCISE DUTY AND SALES TAX TO THE VALUE OF C LOSING STOCK. HOWEVER, THE AO REJECTED THE CONTENTIONS OF THE ASSESSEE BY HOLDING THAT CENVAT CREDIT WAS IN THE NATURE OF INCOME, WHICH BECOMES DUE TO THE ASSESSEE ON THE DATE WHEN INPUT WAS ENTERED IN THE FACTORY PREMISES. THE ONUS FOR WORKING OUT THE CENVAT CREDIT WAS ALSO CAST ON THE ASSESSEE WHICH CLEARLY INDICATED THAT WHATEVER THE CREDIT DETERMINED BY THE ASSESSEE AS PER THE EXCISE RULES AND ENTERED IN THE EXCISE RECO RDS, THE CREDIT BECAME FINAL AND THE INCOME IN THE FORM OF CREDIT IS ACCRUED TO THE ASSE SSEE ON THE DATE OF RECEIPT OF THE INPUT SERVICES OR PRODUCT. ACCORDINGLY, THE AO MADE ADDITION OF RS. 62,02,392/- ON ACCOUNT OF UNUTILIZED CENVAT CREDIT AND RS. 10,33,8 98/- ON ACCOUNT OF UNUTILIZED CENVAT CREDIT ON SERVICE TAX. AGGRIEVED, THE ASSESSEE FILE D APPEAL BEFORE THE FIRST APPELLATE AUTHORITHY. 4. BEFORE, LD. CIT(A), THE ASSESSEE STATED THAT THE ASSESSEE WAS FOLLOWING INCLUSIVE METHOD OF VALUATION OF STOCK AND HAD VALU ED THE STOCK INCLUSIVE OF EXCISE DUTY AND SALES TAX AND, THEREFORE, THERE WAS NO NEED TO INCLUDE MODVAT , EXCISE DUTY AND SALES TAX TO THE VALUE OF CLOSING STOCK. THE ASSES SEE ALSO FILED WRITTEN SUBMISSIONS BEFORE LD. CIT(A) AND CONTENDED THAT UNUTILIZED CEN VAT CREDIT AND SERVICE TAX CANNOT BE CONSIDERED TO BE HE INCOME OF THE ASSESSEE. THE AS SESSEE SUBMITTED THAT THIS CAN NOT BE TAKEN AS INCOME. AO HAS STATED THAT THE ASSES SEE WAS CLAIMING THE EXPENDITURE OF EXCISE DUTY WHICH WAS NOT PAYABLE BY THE ASSESSEE D URING THE YEAR WAS NOT CORRECT. I.T.A. NO.116/MUM/2012 3 5. LD.CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF A SSESSEE AND RELYING ON THE DECISIONS OF THE ITAT INCLUDING THE DECISION OF JB CHEMICALS AND PHARMACEUTICALS LTD (2006) 10 SOT 362 (MUM) VIDE PARA 5 OF IMPUGNED OR DER HAS HELD AS UNDER : 5. I HAVE CAREFULLY CONSIDERED THE ABOVE FACTS. TH E ONLY DISPUTE IN THE PRESENT CASE IS AS TO WHETHER MODVAT CREDIT IS TO BE INCLUDED IN C LOSING STOCK OR NOT. WHILE THE AO HAS HELD THAT SAID ITEM HAS TO BE INCLUDED, THE APPEL LANT HAS CONTESTED THE SAME. THERE IS NO DISPUTE THAT THE PROVISIONS OR SECTION 145A WHIC H ARC MANDATORY HAVE NOT BEEN FULLY ADOPTED BY THE APPELLANT FULLY. SECTION 145A SEEKS TO RECOGNIZE AND MAKE IT COMPULSORY TO VALUE STOCK IN AN EXCLUSIVE METHOD AS AGAINST P REVAILING PRACTICE OF VALUING THE SAME BY INCLUSIVE METHOD. AS A RESULT. THE PURCHASE AND SALES AS WELL INVENTORY SHALL ALWAYS INCLUDE THE CLEMENT OR TAX. DUTY. CESS OR FEE PAID. IT MAY BE STATED HERE THAT IN A RECENT DECISION IN THE CASE OF KAIRA CAN COMPANY LTD. VS, DCIT (2009) 32 ITR 485 (MUM), IT WAS HELD THAT UNDER SECTION 145A, THE ADJUSTMENT ON ACCOUNT OR TAX, DUTY ETC SHALL HAVE TO BE MADE NOT ONLY WITH RESPECT OF CLOSING ST OCK BUT ALSO WITH REFERENCE TO THE OPENING STOCK, PURCHASES AND ALSO SALES. RELIANCE W AS PLACED ON CIT VS. MAHNVIR ALUMINIUM LTD. 214 CTR45 (DEL) IN WHICH SIMILAR DECISION WAS RENDERED. REFERENCE COULD ALSO BE MADE TO THE CASE OF J.B. CHEMICALS A ND PHARMACEUTICALS LTD. (2006) 10 SOT 362 (MUM) IN WHICH IT WAS CLEARLY LAID DOWN THAT MODVAT CREDIT AVAILABLE WOULD HAVE TO BE INCLUDED WHILE VALUING THE CLOSING STOCK , SALES AND PURCHASE, AND PROVISIONS OR SECTION 145A APPLICABLE. ACCORDINGLY, RESPECTFULLY FOLLOWING THE SAID ORDER. THE AO IS DIRECTED TO RECOMPUTE THE PROFITS ALTER MAKING ADJU STMENTS WITH REFERENCE TO THE OPENING STOCK, CLOSING STOCK, PURCHASES AND SALES. HENCE, ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. LD.AR REITERATED THE FACTS OF THE CASE AND SUBMI TTED THAT THE ISSUES RAISED IN THIS APPEAL STANDS COVERED BY THE DECISION OF THE TRIBUN AL IN ASSESSEES OWN CASE IN ITA NOS.4453/MUM/2010 (AY-2006-07) DATED 30.9.2011. 7. LD. DR HAS NOT CONTROVERTED THE ABOVE SUBMISSION OF THE ASSESSEE. 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. REPRESENTATIVES OF THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THAT THE ISSUE RAISED IN THIS APPEAL STANDS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN ASSESSEES O WN (SUPRA). RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE SET ASIDE THE ORDER OF THE LD.CIT(A) AND RESTORE THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE ISSUE UNDER CONSIDERATION FOLLOWING THE JUDGMEN T OF THE HONBLE DELHI HIGH COURT IN HE CASE OF CIT V/S MAHAVIR ALLUMINIUM LTD (2008) 2 97 ITR 77 (DEL) AND ALSO THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V/S MAHALAXMI GLASS WORKS P.LTD (2009) 318 ITR 116 (BOM). I.T.A. NO.116/MUM/2012 4 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JULY, 2013 . ' ) * 25TH, JULY 2013 SD SD ( /SANJAY ARORA) ( . . / /B.R.MITTAL) / ACCOUNTANT MEMBER ' / JUDICIAL MEMBER MUMBAI; * DATED 25/ 07/2013 . . ./ PARIDA , SR. PS ) *+ ,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 0 ( ) / THE CIT(A)- 4. 0 / CIT 5. 1 3 , ' 3 , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , / ITAT, MUMBAI